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Wealth-tax Officer Vs. Brij Bhushan Sanwalka - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Amritsar
Decided On
Judge
Reported in(1983)5ITD43(Asr.)
AppellantWealth-tax Officer
RespondentBrij Bhushan Sanwalka
Excerpt:
.....1974-75.it will be pertinent to invite attention to clause (xvi) of section 5(1) which refers to a limit on investment to be made in the case of each of several investments dealt with therein. that clause gives exemption from wealth-tax only 'to the extent to which the amount of such certificates or deposits do not exceed in each case the maximum amount permitted to be invested or deposited there in'. taking note of this limit as applicable in the assessee's case the maximum amount permitted to be invested in joint names of two adults is only rs. 70,000 and again the proviso refers that such an investment must be made prior to 1-3-1970. it is unthinkable that such an investment will be denied the exemption available to it merely because it does not exceed it self from the figure of rs......
Judgment:
1. Involving the same point, these three wealth-tax appeals of the revenue for the assessment years 1974-75to 1976-77 are conveniently considered together and disposed of by a common order.

2. The facts relevant to these appeals are briefly stated. The assessee in all the three assessment years is having the status of a HUF and the relevant valuation dates were 31-3-1974, 31-3-1975 and 31-3-1976. It Appeal dismissed as sets included an investment in Post Office 12-Year National Defence Certificates of the value of Rs. 70,000 in the first two assessment years and Rs. 62,000 in the third assessment year. As found by the WTO, these certificates were in the joint names of the assessee and his wife and these were purchased prior to 1-3-1970. Being acquired in the names of two adults, the maximum amount permitted to be invested in such a case for the purpose of Section 5(1)(xvi) of the Wealth-tax Act, 1957 ('the Act'), was Rs. 70,000 and this fact is noted in the AAC' s combined order for the first two assessment years dated 12-11-1981. The assessee claimed that proviso to Section 5(1A) rendered this investment to be exempt from wealth-tax in all the three assessment years. The WTO rejected the assessee's claim for raising the ceiling of Rs. 1,50,000 provided in Section 5(1A) to the extent of the value of the assessee's investment in the afore-mentioned National Defence Certificates and his detailed reasons are to be found in the assessment order for the year 1974-75. In brief, according to him, a plain reading of Section 5(1A) and its proviso revealed that exemption in respect of Post Office National Defence Certificates is included in the overall limit of Rs. 1,50,000 and this limit is raised if the investment in the assets as mentioned in Section 5(1)(xv) and (xvi) exceeds Rs. 1,50,000. He was also of the view that the decision of the Kerala High Court in CWT v. H.H. Sethu Parvatlri Bayi [1979] 116 ITR 135 supported his action. He also quoted in the first assessment order from para 71 of the Explanatory Notes on the main provisions of the Finance Act, 1970, again taking the view that the passage supported his case. The assessee went in appeal to the AAC, who wrote a detailed order for the first two assessment years and followed the same view in his order for the third assessment year. Before the AAC, a decision of Madras Bench 'B' of the Tribunal in the case of WTO v. G. Sundram [1981] 11 TTJ 76 was cited, which also considered and applied [by] the Kerala High Court decision in H.H. Sethu' s case (supra) but it reached a conclusion in favour of the assessee. Following the view of the Madras Bench 'B' of the Tribunal, the AAC held that the construction placed by the WTO on Section 5(1A) and the proviso therein was quite erroneous and he held that the assessee was entitled to the exemption in respect of the investment of Rs. 70,000 in the first two years and Rs. 62,000 in the third year. The revenue has come up in appeal to the Tribunal for all the three assessment years.

3. We have heard the rival submissions. The case of the revenue was the same as is stated in detail by the WTO in his first assessment order, namely, the limit of Rs. 1,50,000 was raised as per the proviso to Section 5(1A) only if the investment in the assets as mentioned in Clauses (xv) and (xvi) of Section 5(1) itself exceeded Rs. 1,50,000. On the other hand, the assessee's case was that the view taken by the Madras Bench of the Tribunal was quite correct and as per the proviso the ceiling will be raised and the assessee will be entitled to exemption of Rs. 70,000 in the first two years and Rs. 62,000 in the last year, the investment having been made by the assessee being in accordance with the limit referred to in Section 5(1) (xvi).It was also stated that on a close reading the Kerala High Court decision was in the assessee's favour.

4. We have given our earnest thought to the controversy involved in these appeals. In order to make the provision, i.e., the proviso to Section 5(1A),to be workable, we are inclined to agree with the view taken by the Madras Bench 'B' and the Kerala High Court. The stand taken by there venue will by and large make the proviso to be unworkable and it evenruns contrary to what is stated in para 71 of Explanatory Notes on the main provisions of the Finance Act, 1970, which is quoted by the WTO in the assessment order of the year 1974-75.

It will be pertinent to invite attention to Clause (xvi) of Section 5(1) which refers to a limit on investment to be made in the case of each of several investments dealt with therein. That clause gives exemption from wealth-tax only 'to the extent to which the amount of such certificates or deposits do not exceed in each case the maximum amount permitted to be invested or deposited there in'. Taking note of this limit as applicable in the assessee's case the maximum amount permitted to be invested in joint names of two adults is only Rs. 70,000 and again the proviso refers that such an investment must be made prior to 1-3-1970. It is unthinkable that such an investment will be denied the exemption available to it merely because it does not exceed it self from the figure of Rs. 1,50,000. In other words, what assumed by the argument of the revenue will be that an assessee should first make an investment of more than Rs. 1,50,000, which is not permitted at all to be made by the relevant rules framed by the post office. It will, therefore, be inappropriate to hold that an assessee must invest beyond the limits prescribed for each type of investment or must make investment in more than one such type before the proviso to Section 5(1 A) can come into operation and that too before 1-3-1970. It is this aspect which has been tersely referred to in the Madras Bench decision when it observes that revenue' sinter pretation cannot be correct in view of the ceilings for investment under clauses (xv) and (xvi) which are much less than Rs. 1,50,000.

5. We also share the reading of Madras Bench of the decision of the Kerala High Court in the case of H.H. Sethu (supra). We quote there levant para: The question of law to be answered in this case lies in a small compass. What exactly is the scope and limit of exemption enjoyed by an assessee under the combined operation of Section 5(1)(xv) and (xvi) read with Section 5(1A) We may mention that the maximum amount of investment in the securities and deposits mentioned in clauses (xv) and (xvi)have been specified by the Government in appropriate notifications. It may perhaps be enough to notice that the maximum amount which can be invested in National Defence Certificates is Rs. 35,000. While Section 5(1) by Clause (i), et seq. lists the items of wealth in respect of which wealth tax shall not be payable, Section 5(1A) put a maximum limit of Rs. 1,50,000, in respect of the exemption to be earned from the net wealth of assets referred to in Clauses (xv), (xvi), (xxii), (xxiii), (xxiv), (xxv),(xxvi), (xxvii), (xxviii), (xxix), (xxxi) and (xxxii) of Section 5(1). Then follows the proviso. That proviso enacts that where the assets include those referred to in Clause (xv) or (xvi) held prior to 1st March 1970 and their value exceeds Rs. 1,50,000, 'such limit shall be raised by the said amount. The words it alicised are clear and specific. Having fixed the ceiling limit for exemption from net wealth in respect of certain categories under Section 5(1A), the proviso enacts that where the net wealth includes items under (xv) and (xvi) of Section 5(1A), above the ceiling limit, held prior to March 1, 1970, the ceiling shall be raised by the amount of suchexcess. On the plain language of the proviso, in the contingency provided, the exemption limit shall be raised to the extent of such excess and no more. We are not prepared, as the Tribunal was, to whittle down the plain meaning from the language of these provisions by any presumed or assumed intention of the Legislature as gathered from the speech of the Finance Minister introducing the Finance Act of 1970. (pp. 137-38) The Kerala High Court in effect has held that ceiling of Rs. 1,50,000 as given in Section 5(1A) gets enhanced by the amounts of investments specified in Clauses (xv) and (xvi) though such enhancement stands limited to the maximum eligible for exemption in respect of each class of investment individually. It appears to us that the Kerala High Court decided the issue in favour of the department by taking note of the fact that the amount invested in National Defence Certificates claimed to be exempt was more than the maximum amount of Rs. 35,000 which could be invested.

6. We may deal with another aspect, which arises from the High Court 'sob servation in the last sentence in the passage quoted above. It may be stated that the WTO has quoted the under-mentioned para 71 of the Explanatory Notes on the main provisions of the Finance Act, 1970 which is printed in [1971] 79 ITR 62 (St.) : Para 71 of the Explanatory Notes on the main provisions of Finance Act, 1970 is as under : As investments in the small savings certificates and deposits schemes of the Central Government already exempt from tax may, in some cases, exceed the limit of Rs. 1,50,000 it has been specifically provided that such investments made before the 1st March, 1970, will continue to enjoy exemption even if their aggregate value exceeds the limit of Rs. 1,50,000,as long as they continued to be held by the assessee.

The Tribunal appears to have referred to the speech of the Finance Minister introducing the Finance Act of 1970. The view taken by the Kerala High Court in the sentence referred to above no longer seems to be in accordance with what is observed by the Supreme Court in the well known case of K.P. Varghese v. ITO [1981] 131 ITR 597. It has been observed in brief by the Supreme Court that its views were in accordance with the recent trend in juristic thought not only in western countries but also in India, that the interpretation of a statute being an exercise in the as certainment of meaning, everything which is logically relevant should be admissible. The speech of the Finance Minister and other materials will obviously become relevant to understand the meaning of the provision in hand.

7. In the result, we are of the opinion that the interpretation given by the AAC is fully justified and we uphold his action for all the three assessment years.


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